(Bloomberg) — The world’s deepest precious-metals mines, together with giant iron-ore and coal pits are providing an unexpected boon to a South African economy slowly recovering from its biggest contraction in a century.
Surging demand and prices for commodities including platinum-group metals, iron ore, manganese and coal are generating record mining-company profits and bolstering government revenue. That’s even as decades of dwindling output and investor reluctance to build new mines blights prospects for the industry.
“Last year, we were concerned about the lack of space to support the economy amid the severe hit from the pandemic,” Elna Moolman, a South Africa economist at Standard Bank Group Ltd., said in an interview. “The recovery in commodities demand and their prices is providing very strong support to the economy.”
President Cyril Ramaphosa on Monday flagged the “significant role” the sector will play in accelerating South Africa’s recovery from last year’s coronavirus-induced slump.
The mining industry often takes center stage when South Africa’s economic fortunes dip.
Its gold industry — once the world’s largest — underpinned the nation’s transformation into the continent’s most industrialized economy. Bullion sales cushioned the economy against the impact of the oil-price and dollar collapse in the 1970s and as international outrage against apartheid rule a decade later resulted in massive capital outflows. The commodities boom in the 2000s provided the Treasury with a war chest to withstand the devastating effects of the global financial crisis.
The mining industry’s output surged 18.1% in the first quarter compared to the previous three months, helping buoy growth more than forecast. The sector accounted for 9% of gross domestic product during the period.
Last year, the mining industry, which employs more than 451,000 people, accounted for 8.2% of GDP, according to the Minerals Council South Africa, an industry lobby group.
Revenue for the fiscal year through March exceeded budget estimates for the first time in five years as the industry drove an increase in corporate income tax collections, and led to the shortfall on the main budget coming in below forecast.
That’s allowed the Treasury to reduce the amount of debt on sale at its weekly auctions for a second time since March and bodes well for its plans to achieve a primary surplus in fiscal 2024-25 and stabilize debt at 88.9% of GDP the following year.
The world’s top platinum suppliers’ exports of platinum-group metals surged 40% in 2020, even as Covid-19 disrupted operations and curbed output, the national statistics agency said in April. Sales of PGMs, which are in demand as stricter emission rules boost their use in vehicle autocatalysts, raked in 190 billion rand ($13.3 billion) amid a rally in palladium and rhodium prices.
South Africa’s terms of trade — a measure of export prices relative to import costs — increased 12% over the past year and more than 20% since the end of 2018, as the global economic recovery from the pandemic pushed up demand for commodities, according to HSBC Bank Plc economist David Faulkner.
The trade windfall is “one of the strongest gains on record, with past experience highlighting how South Africa’s macro fortunes can tilt on favorable commodity prices and a benign external backdrop,” Faulkner said in a note. “The result has been a period of respite, relief and rally.”
Still, a failure by Ramaphosa’s government to take advantage of the commodity rally to expedite a raft of reforms and attract investment to boost growth and create new jobs could counter the recent fiscal gains. The South African Reserve Bank forecasts that the commodities price rally may be temporary.
“These are economic challenges that will require sustained policy action to reverse,” Faulkner said. “They also leave South Africa with balance sheet vulnerabilities at risk of being exposed should the recent rise in metal prices prove transitory or risk appetite sour.”
What Bloomberg Economics Says…
“Rising commodity prices provide a welcome respite for the budget. They are, however, not a panacea. The government will still have to follow through with its consolidation plans to stabilize the debt trajectory.”
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
